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: Retirement savers: This is the most important investing decision you can make

Do an online search for the most important investment decisions, and you’ll get a lot of answers.

When I did my own search, Google offered up 860 million results. I didn’t study them all, but the most common top-ranked item seemed to be asset allocation. ChatGPT came to the same conclusion.

Asset allocation is extremely important. And of course you have to save money in the first place. Certainly you should diversify, take a long-term view, avoid risky speculations, be careful who you trust, keep your costs low and avoid pyramid schemes and other shady deals.

Read: Reality bites for Gen X retirement savers

However, lately I have become convinced that the most important investment decision is something more fundamental: Will you follow the advice of a professional adviser, or will you be your own adviser and do things yourself?

That decision can have a huge impact on your financial future as well as your peace of mind.

I was a professional adviser for many years, and there is no doubt in my mind that my clients benefited from the help they got. And yet, after being retired for more than a decade, I’ve come to see that—at least for investors who are willing to do the work—a do-it-yourself approach can be much better.

If you hire an adviser, you’ll have fewer decisions to make; you’ll spend fewer hours doing research and trying to understand important financial concepts and adapt them to your own circumstances. Your adviser will make sure that essential tasks like rebalancing and tax planning actually get done.

Read: Are you still making this huge mistake with your grown kids?

And when (not if) things don’t go as you expected, your adviser can help you keep your emotions in check and stick to your plan.

On the downside, all this will cost you money, and over the years, that cost could add up to considerably more than you expected.

On the other hand, if you’re a do-it-yourselfer, you’ll need to become an expert. It’s a lot of responsibility, and you’ll have to navigate perhaps 20 important forks in the road.  

If you do it well, being your own adviser has the potential to leave you with millions more dollars over a lifetime.

Some of that additional money will be there because you didn’t pay somebody to do what you did yourself. And some will be there because you didn’t fall prey to what Wall Street wanted to sell you.

I cannot know which path is better for you personally. But this fundamental decision is definitely worth some thinking time.

Many people are averse to pay for someone else’s expertise. You may know some who are sure they know more than their doctor, their attorney or even their psychologist.

Read: Retiring early? 5 things to consider before you make the leap.

I’m not saying this is wrong, but usually the outcomes are different if you do something yourself instead of hiring a professional.

Most professionals have put in many hours of study. They’ve learned ways to make things go more smoothly and to avoid dumb decisions that are likely to lead to trouble.

At the same time, professionals are in business to make money. And ultimately all that money comes from their clients and customers.

In the investment world, Wall Street wants you to just buy what it has for sale and to trust sales agents. This always works out well for Wall Street. Sometimes it works well for the customers.

Fortunately, you can sort of have your cake and eat it too. The simplest DIY solution—and in my view the best solution for many people—is to put your whole portfolio into a target-date retirement fund. One decision, one thing to keep track of. You won’t get the very best solution, but you’ll probably attain better long-term results than 95% of other investors your age.

At the opposite end of the scale, almost anyone these days can jump into investing. If you have $100 and a computer, you can invest commission-free at Fidelity, Vanguard or Charles Schwab. The process is designed to be easy.

Easy isn’t necessarily good. An hour or two of online “research” will yield some ideas that are excellent, some that are pretty awful, and still others that are deliberately misleading.  

If you can’t tell the good from the bad, you’re a sitting duck waiting to become Wall Street’s prey.

If you want to be your own adviser, here are six key recommendations:

1. Realize you are taking on a serious commitment; be willing to put in 40 hours or more of study time.

2. Don’t expect to do a perfect job. Learn from your own mistakes and the mistakes of others. If you’re retired, beware of these mistakes.  

3. Pay attention to the evidence (or lack of it) behind the choices you make. All the tables and other data I present are based on the best academic evidence I have found over the last half-century.

4. Never, ever, ever make a fast investment decision based on something you just learned or read or heard. If the move you are contemplating today is really good, it will be equally good a week from now, after you’ve had time to think it through.

5. Before you do anything with your money, familiarize yourself with the most important tools I used when I was a professional adviser. You’ll find those tools in a series of articles I wrote earlier this year under the title of “Boot camp for investors.”

6. Finally, spend at least as much time thinking about how to manage risks as you think about getting rich. I guarantee you’ll have little trouble with getting rich. But taking too much risk, or the wrong risks, can rob you of your peace of mind, to say nothing of your life savings. In an upcoming article, I’ll list more than 30 risks faced by investors and tell you how to manage them.

For more on this entire topic, check out my podcast.

Richard Buck contributed to this article.

Paul Merriman and Richard Buck are the authors of “We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement.” Get your free copy.

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